Zoological Parks Authority - Parliament of Western Australia - The ...

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Zoological Parks Authority ANNUAL REPORT 2012 Disclosures and Legal Compliance Financial Statements Zoological Parks Authority Notes to the Financial Statements for the Year Ended 30 June 2012 continued Where market-based evidence is available, the fair value of land and buildings is determined on the basis of current market buying values determined by reference to recent market transactions. When buildings are revalued by reference to recent market transactions, the accumulated depreciation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount. In the absence of market-based evidence, fair value of land and buildings is determined on the basis of existing use. This normally applies where buildings are specialised or where the land use is restricted. Fair value for existing use assets is determined by reference to the cost of replacing the remaining future economic benefits embodied in the asset, i.e. the depreciated replacement cost. Where the fair value of buildings is determined on the depreciated replacement cost, the gross carrying amount and the accumulated depreciation are restated proportionately. Land and buildings are independently valued annually by the Western Australian Land Information Authority (Valuation Services) and recognised annually to ensure that the carrying amount does not differ materially from the asset’s fair value at the end of the reporting period. Valuation Services performs a physical site inspection of buildings every three years and the cost of acquisitions by the Authority between the physical inspections is considered to approximate their fair value. Works of art are independently valued by a qualified valuer every three years on the basis of fair value, determined using current market buying values. The cost of acquisitions by the Authority between valuations is considered to approximate their fair value. The most significant assumptions in estimating fair value are made in assessing whether to apply the existing use basis to assets and in determining estimated useful life. Professional judgement by the valuer is required where the evidence does not provide a clear distinction between market type assets and existing use assets. Refer to note 25 ‘Property, plant and equipment, infrastructure’ for further information on revaluations. Derecognition Upon disposal or derecognition of an item of property, plant and equipment and infrastructure, any revaluation surplus relating to that asset is retained in the asset revaluation surplus. 74 Asset revaluation surplus The asset revaluation surplus is used to record increments and decrements on the revaluation of non-current assets as described in note 25 ‘Property, plant and equipment, infrastructure’. Depreciation All non-current assets having a limited useful life are systematically depreciated over their estimated useful lives in a manner that reflects the consumption of their future economic benefits. Depreciation is calculated using the straight line method, using rates which are reviewed annually. Estimated useful lives for each class of depreciable asset are: Buildings & Improvements 10 to 40 years Infrastructure 10 to 40 years Plant, Equipment & Furniture 3 to 10 years Motor Vehicles 5 to 10 years Works of art controlled by the Authority are classified as property, plant and equipment. These are anticipated to have very long and indefinite useful lives. Their service potential has not, in any material sense, been consumed during the reporting period and so no depreciation has been recognised. Land is not depreciated. (h) Impairment of assets Property, plant and equipment, and infrastructure assets are tested for any indication of impairment at the end of each reporting period. Where there is an indication of impairment, the recoverable amount is estimated. Where the recoverable amount is less than the carrying amount, the asset is considered impaired and is written down to the recoverable amount and an impairment loss is recognised. As the Authority is a not-for-profit entity, unless an asset has been identified as a surplus asset, the recoverable amount is the higher of an asset’s fair value less costs to sell and depreciated replacement cost. The risk of impairment is generally limited to circumstances where an asset’s depreciation is materially understated, where the replacement cost is falling or where there is a significant change in useful life.
Zoological Parks Authority ANNUAL REPORT 2012 Disclosures and Legal Compliance Financial Statements Zoological Parks Authority Notes to the Financial Statements for the Year Ended 30 June 2012 continued (i) (j) Each relevant class of assets is reviewed annually to verify that the accumulated depreciation/amortisation reflects the level of consumption or expiration of asset’s future economic benefits and to evaluate any impairment risk from falling replacement costs. The recoverable amount of assets identified as surplus assets is the higher of fair value less costs to sell and the present value of future cash flows expected to be derived from the asset. Surplus assets carried at fair value have no risk of material impairment where fair value is determined by reference to marketbased evidence. Where fair value is determined by reference to depreciated replacement cost, surplus assets are at risk of impairment and the recoverable amount is measured. Surplus assets at cost are tested for indications of impairment at the end of each reporting period. Refer note 26 ‘Impairment of assets’ for the outcome of impairment reviews and testing. Non-current assets (or disposal groups) classified as held for sale Non-current assets (or disposal groups) held for sale are recognised at the lower of carrying amount and fair value less costs to sell, and are disclosed separately from other assets in the Statement of Financial Position. Assets classified as held for sale are not depreciated or amortised. Leases Finance lease rights and obligations are initially recognised, at the commencement of the lease term, as assets and liabilities equal in amount to the fair value of the leased item or, if lower, the present value of minimum lease payments, determined at the inception of the lease. The assets are disclosed as plant, equipment and vehicles under lease, and are depreciated over the period during which the Authority is expected to benefit from their use. Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding lease liability, according to the interest rate implicit in the lease. Finance lease liabilities are allocated between current and non-current components. The principal component of lease payments due on or before the end of the succeeding year is disclosed as a current liability, and the remainder of the lease liability is disclosed as a non-current liability. (k) Financial instruments In addition to cash, the Authority has two categories of financial instrument: – Loans and Receivables; and – Financial liabilities measured at amortised cost. (l) Financial instruments have been disaggregated into the following classes: Financial Assets – Cash and cash equivalents – Restricted cash and cash equivalents – Receivables – Amounts receivable for services Financial Liabilities – Payables – Finance lease liabilities Initial recognition and measurement of financial instruments is at fair value which normally equates to the transaction cost or the face value. Subsequent measurement is at amortised cost using the effective interest method. The fair value of short-term receivables and payables is the transaction cost or the face value because there is no interest rate applicable and subsequent measurement is not required as the effect of discounting is not material. Cash and cash equivalents For the purpose of the Statement of Cash Flows, cash and cash equivalent (and restricted cash and cash equivalent) assets comprise cash on hand and short-term deposits with original maturities of three months or less that are readily convertible to a known amount of cash and which are subject to insignificant risk of changes in value, and bank overdrafts. (m) Accrued salaries Accrued salaries (refer note 27 ‘Payables’) represent the amount due to staff but unpaid at the end of the financial year. Accrued salaries are settled within a fortnight of the financial year end. The Authority considers the carrying amount of accrued salaries to be equivalent to its net fair value. 75
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